The majority (72%) of aspiring Canadian homeowners are waiting until interest rates drop before purchasing a home. This represents a 4% increase from 2023, according to the BMO Real Financial Progress Index.

The same research reveals rising concerns about the cost of living (58%), inflation (56%) and their overall financial situation (38%), over the past three months.

According to BMO Economics, homebuyers may need to wait longer for affordability relief. The Bank of Canada left interest rates unchanged in April. But it has left the possibility open for a rate cut by June or July 2024.

“Demographic forces have allowed some pent-up demand to build. Market psychology is such that many are expecting rate cuts in the second half of the year,” said Robert Kavcic, Senior Economist, BMO Capital Markets.

“This should pull some demand off the sideline and firm up housing activity. But rates have a long way to fall still before affordability is restored to recent norms.”

The BMO Real Financial Progress Index found 85% of Canadians believe they are making real financial progress. Over two thirds (67%) feel confident in their financial situation. But fear of unknown expenses (84%) and concerns about their overall financial situation (81%) and housing costs (74%) are among the leading sources of financial anxiety.

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Top economic and environmental concerns affecting Canadians’ homebuying decisions

  • Redefining the Canadian Dream: While 62% believe owning a home is one of their biggest aspirations in life, 56% of aspiring homeowners feel homeownership is unattainable.
  • Pent Up Demand: Among the 39% of aspiring homeowners planning on purchasing a home in the near future, only 13% plan to in 2024 and more than a quarter (26%) plan on doing so in 2025 or later.
  • Re-examining Refinancing: Nearly three quarters (74%) of homeowners who plan to refinance their home say they will wait until mortgage rates drop before refinancing.
  • Climbing Climate Considerations: 39% of Canadians say climate-related factors such as wildfires, floods, heatwaves, and storms will affect where they choose to live in the next five years. Gen Z (54%) and Millennials (49%) are the most likely to prioritize climate-related factors in their homebuying decisions.
  • The Cost of Homeownership: 41% say rising home insurance costs may affect their ability to maintain or buy a home.